The Newspaper Paywall Holy War

Meanwhile, the FCC is still lashed to its pre-digital 'media ownership' obsessions.

By

Holman W. Jenkins, Jr.

Dec. 21, 2012 6:23 p.m. ET

A good business model is any that pays the bills, and a leaky paywall is a business model that has begun to work for the newspaper industry—though the Washington Post isn't on board. Cue holy war.

But let's start by changing the subject. Should journalism professors be coaching students how to get around newspaper paywalls? Recent emails on just this subject were exchanged by some at Arizona State University and were surfaced on the Web by a disapproving paywall advocate.

The sin in question is an ambiguous one. Take the New York Times paywall, introduced last year. It grants digital visitors 10 free articles a month and then requires them to subscribe—sort of. In fact, the Times paywall is easy to get around using Google or browser widgets, and management hardly seems to mind. Readers who are willing to pay are encouraged to pay; those unwilling to pay can still be eyeballs for the company's digital advertising.

Yes, the economics of the newspaper remain rather gruesome. But the Times is estimated to pull in an extra $100 million a year with its leaky paywall.

ENLARGE

Bloomberg

So why doesn't the Washington Post, a paper enthusiasts feel a special attachment to thanks to Watergate and all that, get with the program? A ferocious team of bloggers at the Columbia Journalism Review have taken up the cudgels and beaten the paper's controlling family nearly senseless in recent weeks. On Dec. 3, Post CEO Don Graham answered back in a public appearance at a UBS investors conference in New York.

The Post isn't the New York Times or The Wall Street Journal, he explained. It doesn't distribute a print edition nationally. Yet the Post still competes as a national voice, receiving 90% of its digital traffic from outside the Washington area.

What would these readers do if they hit a paywall? The Post can't deliver them a paper edition. They might be willing to pay for the Post's website—or they might spring for the Journal or the Times instead. Then the Post would lose its unstated selling point as the last "quality" national paper that's still free to digital readers.

Mr. Graham didn't quite say it this way, but such was the thrust of his argument. He said the Post was still noodling and would jump at a paywall if it could provide an immediate boost to cash flow. Subsequent leakage indicates a paywall may already be in the works for next summer, though these reports don't indicate what Mayan calendar the Post is using to predict that its basic dilemma (or the cash-flow hurdle) will be transformed by next summer.

In any case, wholly inappropriate are absolutist stands for or against newspaper paywalls, either because "information wants to be free" or because it's insulting to journalists not to charge for their work. One-model-fits-all orthodoxy is hardly what the business needs at this point.

Warren Buffett, after shoveling dirt on the industry in previous comments, has been buying up small-market newspapers on the theory that they enjoy a local monopoly on certain kinds of information. We'll see. The communities he's targeting, where people know each other and have common points of reference, may also be most likely to foster spontaneous Twitter- or FacebookFB-1.26%-like networks that uncover and distribute news better than a centralized newsroom can.

Newspapers, of course, hope to incorporate these technologies too. But there is a reason new business models sprout from new companies rather than old ones. Which brings us to a second accusation against the Post: That management has succumbed to pessimism and is satisfied to suck cash out of its newspaper business rather than invest in roll-the-dice turnaround efforts.

If true, plenty of newspaper owners are doing the same, and it isn't cowardly. The whole world is competing to invent new business models. Established companies, with investors who are mainly concerned about their own well-being, have a responsibility to earn cash if they can, and even to milk a declining business rather than gamble on its far-fetched resurrection.

"Creative destruction," remember, is a phrase of two words. Good capitalists are no less good capitalists when doing an astute job of managing a "destroyed" business in the interests of its owners.

Finally, we would be remiss not to mention the one true disgrace in all this—the Federal Communications Commission's slowness to reform its ridiculous and antiquated media ownership rules, which block many promising print-and-broadcast mergers.

These rules stopped making sense decades ago, but certain Beltway parasites have built their careers on decrying "media monopoly" and can't seem to stop. They carry on simply to preserve the relevance of their own very limited human capital, which is expressed in annual invitations to testify at congressional hearings. Where are the blogosphere's pitchfork brigades when you need them?

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